Thursday, September 26, 2013

Many
people believe that buying a franchise is a great idea, a sound bet, and that
they cannot fail. How can they possibly fail as they are buying a turn-key
business with a cookie cutter system, training and ongoing support?

Unfortunately,
many buyers get sucked into this illusory belief system and false sense of
security that franchises are a sure thing. Take my word for it, there are no
sure things.

Buying
new franchises can be as risky as starting a new business or throwing your
money on the craps table, buying a lottery ticket, etc. Throwing your money
away gambling can be a one-time loss; however, buying a new franchise can cost
you money for years. If you don’t care about obtaining an ROI (return on
investment) and you’re OK with throwing your money down a black hole, then go
ahead and buy a new franchise.It’s
about time someone tells buyers the truth. Starting a new business or investing
in a new/startup franchise is a huge gamble. At least with a franchise, you are
buying systems, training and support, thus creating a slightly safer investment
than starting a business from scratch. However, starting a new franchise is
still very expensive and extremely risky. You'd better have a pile of working
capital lying around to keep you above ground. It is proven that new franchises
and businesses will operate in the red for years. Many of them will go out of
business or be sold for pennies on the dollar. I have seen many new franchises
file bankruptcy. People don’t fail just because they didn't write a business
plan or implement a marketing plan; they fail because they run out of money. [more...]